Earlier this week, I was a guest on The Sam Lesante Show, a long-running TV talk show on Channel 13 in Hazleton, PA. My friend Sam Lesante played devil’s advocate as we discussed my book Letter to the One Percent:
Congratulations. You are the richest class of human beings in the history of the world. Collectively, you own 26 percent of this nation’s wealth. Add in the next richest 5 percent of Americans, and you have more money than everyone else combined. Nowhere else in the world would you be able to earn so much and give back so little.
You worked hard for that money. No one can deny that. You have been rewarded for your talent, your intelligence, your risk-taking, your creativity, and your good fortune. The notion that you should change a system that has worked so well must seem downright stupid.
But, as the philosopher Amartya Sen reminds us, “What we can see is not independent of where we stand in relation to what we are trying to see.”
From where you’re standing, things must look pretty good. In the world you live in, economic growth is strong. Unemployment is brief, rare, and softened by ample savings. Health insurance is affordable. Education is among the best in the world. Food, shelter, and transportation are never hard to come by. And retirement will surely be comfortable.
It’s not perfect. You may get fired. You may lose money. You may experience stress and sacrifice and sorrow. But you will not struggle to survive. You will not be denied the American Dream.
So it’s only natural that you believe this path is open to everyone. But this could not be further from the truth.
In the world outside the One Percent, economic growth is sluggish — and has been so, on average, for more than thirty years. For most Americans, in fact, it has been nonexistent. Unemployment is a common and devastating threat. Retirement is an uphill battle. Education is a crapshoot. Food, shelter, and transportation strain the budget. And until recently, health insurance was a luxury afforded to some but not nearly all.
You’ve read these complaints before. You’ve heard the voices shouting outside your office windows. You’ve seen the faces protesting on your television screens. But, in all likelihood, you haven’t seen the world through their eyes. And that makes all the difference.
Adam Smith, the father of modern economics, taught that we cannot know what is the right thing to do until we have looked at a situation through the eyes of an “impartial spectator.”
“In solitude,” wrote Smith, “we are apt to feel too strongly whatever relates to ourselves… The conversation of a friend brings us to a better, that of a stranger to still a better temper. The man within the breast, the abstract and ideal spectator of our sentiments and conduct, requires often to be awakened and put in mind of his duty.”
That duty is great, for you wield immense power.
A few years ago, the political scientist Larry Bartels studied the voting record of U.S. Senators on issues where the rich, the middle class, and the poor disagreed. He found that the Senators sided with the rich 50 percent more often than they sided with the middle class, and they always sided with the rich and the middle class over the poor.
In a sense, they’re protecting their own. After all, the average legislator is six times richer than the average citizen.
They also have more reasons and more opportunities to hear what you have to say. Corporations, which you own and run, spend significantly more money lobbying and have significantly more high-level government allies than their opponents. The result is that corporations win lobbying battles far more often than unions or citizen groups.
You have an obligation to use that influence responsibly. Since the 1970s, you have failed in that duty. By tilting the playing field away from the 99 Percent, you siphoned an increasing share of the nation’s resources, until the country was drowning in debt, struggling to keep up, and unable to fuel the recovery it so desperately needed. Once you had climbed the ladder of success, you pulled up the ladder so no one could come up after you.
I don’t believe you did so with malicious intent. After all, many of you are my friends and colleagues. Rather, I believe you were practicing what the late economist John Kenneth Galbraith called “innocent fraud.”
“It is innocent,” explained Galbraith, “because most who employ it are without conscious guilt. It is fraud because it is quietly in the service of special interest.”
As opposed to general interest, the interest of all Americans. There is a way to become rich without impoverishing everyone else — and we as Americans celebrate that sort of success — but that’s not what has happened in recent years.
To be clear: It is not your accumulation of wealth per se that lies at the root of our problems. It is the manner in which that wealth was accumulated: through the systematic demolition of the tax code, regulations, public spending, and labor market institutions that created the greatest prosperity the world has ever seen.
The good news is, all that wealth gives you the ability to undo the damage. You are the most powerful citizens of the most powerful country in the world. Your country needs you. You have the influence, the means, and the brainpower to turn this economy around, but you must know the facts. You must hear the cold, hard truth.
No, I’m not trying to start a class war. Quite the opposite. I’m asking you to end the class war. I’m asking you to construct an economy where everyone benefits, rather than the few at the expense of the many.
“There’s class warfare, all right,” said Warren Buffett in 2006, “but it’s my class, the rich class, that’s making war, and we’re winning.”
You probably don’t see it that way. “War” is a strong word. But that’s because it’s not your standard of living that’s been under near-constant attack for thirty-plus years. Your piece of the pie has been growing. Your voices have been heard. And that’s why you’re the ones who have to step up.
Nothing less than what Sen calls “the freedom to determine the nature of our lives” is at stake. That’s something that you have and most of the 99 Percent doesn’t. That kind of freedom only comes with a good job with good benefits in a growing economy where good schools and a safe neighborhood in a clean environment create real opportunity. Not only is that kind of freedom at the heart of the American Dream; it’s also our natural birthright as human beings. Yet it’s been slipping out of reach for more and more Americans with each passing year.
Things can get worse. Let us hope they do not. Of course, it’s one thing to hope; it’s quite another to act. But act you must. In my new book Letter to the One Percent, I explain why. To learn more, visit www.LetterToTheOnePercent.com.
This op-ed is an excerpt from my new book Letter to the One Percent, published this month by Lulu Press, Inc.
You win the modern financial-regulation game by filing the most motions, attending the most hearings, giving the most money to the most politicians and, above all, by keeping at it, day after day, year after fiscal year, until stealing is legal again.
With the Republican primary coming down to the wire, the candidates are running low on cash.
Thanks to the Supreme Court’s ruling in Citizens United v. Federal Election Commission, Super PACs have sprung up, with no limit on how much they can spend. According to OpenSecrets.org, Super PACs have raised $153 million so far, prompting a renewed debate over the effect this money will have on policymaking.
Let’s begin with the obvious: Money matters.
In multiple studies, scholars have found that policymakers pay no attention to the views of the bottom third of income earners and that the views of the upper third receive 50 percent more weight than the middle third. Take a moment to consider just how undemocratic that is.
There are many reasons for this behavior, but here are a few.
First, 75 percent of campaign contributions come from the top 25 percent of income earners and only 2 percent come from the bottom 20 percent.
Second, the median individual net worth of legislators is approximately six times the median net worth for the general population.
Third, throughout history, less than 5 percent of legislators have come from the working class, while more than 75 percent of them have been lawyers and businesspeople (who only comprise 10 percent of the general population).
And fifth, only the rich can afford lobbyists and personal access to policymakers.
As Harvard law professor Lawrence Lessig points out in his new book Republic, Lost, legislators do not literally vote in exchange for money. That would be bribery, which is a crime. Instead, they listen to lobbyists whom they consider their friends. Maybe the lobbyist is an ex-employee or an ex-colleague or just a really smart, well-connected Washington insider. The lobbyist gives the legislator advice, and the legislator uses that advice to advance legislation that both of them support. It’s more like an exchange of gifts, says Lessig, than a cash transaction.
This is not a new theory. In the 1990s, social scientists Dan Clawson, Alan Neustadtl, and Mark Weller performed the most thorough investigation to date, interviewing hundreds of behind-the-scenes players in campaign fundraising. In their book Dollars and Votes, they concluded that the true value of money in politics is access to power. Only the top few percent can afford to take their case directly to policymakers, and that makes all the difference.
A few years ago, in the book Lobbying and Policy Change, a team of political scientists reported results from an unprecedented study where they tracked dozens of specific policies over time, including everyone who lobbied for or against the policies. The imbalance they found between the corporate elite and the rest of the population is stunning.
In a lobbying battle, the side with more high-level government allies won 78 percent of the time! Business corporations had a high-level government ally 74 percent of the time, compared to 45 percent for unions and 33 percent for citizen groups.
Similarly, the side with more “covered officials” lobbying won 63 percent of the time. Business corporations had a covered official lobbing 91 percent of the time, compared to 14 percent for unions and 24 percent for citizen groups.
“Where the mobilization of resources is unbalanced, we do find that the wealthy side tends to win,” they report. On average, business corporations spent $1 million on lobbying. Trade associations spent $1.3 million. Unions spent $0.5 million. Citizen groups spent $0.2 million.
You can overturn Citizens United. You can ban Super PACs. You can even institute public financing of elections. But you can’t take money out of politics.
I’m not saying we shouldn’t try. I’m saying this problem predates Super PACs. It goes so much deeper than lobbying and campaign contributions. The elite have always had the ear of Congress. They have always been Congress. They have always owned the media. They have always controlled the conversation. And they do not speak for us.
This op-ed was published in today’s South Florida Sun-Sentinel.
With Halloween just around the corner, I thought I’d show you how economics can even rid you of those pesky haunting spirits. But seriously, here’s my second column in the South Florida Sun-Sentinel. The question I address lies at the heart of public choice economics, though I didn’t have enough room to delve into the details too much. I’ve written briefly about this subfield before, and I think it deserves more careful consideration by economists, not to mention the voting public. The peak of public choice came under James M. Buchanan (who won the Nobel Prize) and Gordon Tullock, both of whom concluded that most government intervention makes things worse. You can debate their opinion—and I do, on many counts—but too often we talk about market failure and don’t even think about the negative consequences of the government “solutions” we are proposing. Continue reading “Ghostbuster Economics”